Vehicles are on display at a Carvana dealership in Austin, Texas, on February 20, 2023.
Brandon Bell | Getty Images
Carvana Shares rose 30% on Friday after posting their first-ever annual profit and receiving a pair of upgrades by Wall Street analysts.
The used car retailer has trimmed inventory and expenses as it rebounds from declines from the height of the pandemic. After the COVID-19 pandemic increased demand for online car sales, the company's stock rose. But after this demand declined, Carvana was forced to begin an aggressive restructuring and cost-cutting process.
In an after-hours earnings report on Thursday, the company reported its first annual profit with net income of $450 million for 2023 compared to a loss of $1.59 billion in 2022.
CEO Ernie Garcia told CNBC's “Money Movers” on Friday morning that the company is in an “incredible competitive position.”
The company is currently undertaking the second step of a three-step restructuring plan, which includes achieving break-even on an EBITDA basis, propelling the business to significant positive unit economics and a return to growth.
Its gross profit per unit more than doubled to $5,283, up from $2,219 in the same period last year, according to the quarterly report.
The company noted in its earnings report that the macroeconomic auto sales environment remains uncertain, although it expects retail units sold to grow during the first quarter and into 2024.
Analysts at Raymond James upgraded their rating on the stock to market perform on Friday, highlighting encouraging GPU trends. Investor sentiment “aligns more closely with the narrative of Carvana's long-term market potential,” the analysts wrote.
The company's stock soared last year and now trades at about $70 per share, still far from the pandemic high of $370 per share it achieved in 2021. The stock lost almost all of its value in 2022, sparking bankruptcy fears that have faded. since then. Signs of recovery.
William Blair analysts also raised Carvana's rating to “outperform” due to increased earnings and unit growth, noting that they believe the company is “now poised for further penetration” with an encouraging 2024 outlook.
Carvana, with a 1% market share, remains focused on its existing stock despite last year's growth and profits, Garcia told CNBC.
“I think we'll have to see what we're working on right now,” Garcia said. “There's no doubt that in the medium term, increasing our inventory to give our customers more choice is going to be a big part of our strategy. I think our goal is to be a place where customers come for the simplest experience, for the best prices and the best selection.”
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